Inflation in Latin America could begin to decline, with the exception of Argentina


Most countries in the Latin American region have already published their CPI figures for April, all accumulating increases compared to the previous month in line with analysts' expectations, and almost all above the target set by central banks.

Monthly inflation of the Argentina nation led by Mauricio Macri, with the market expecting an advance of the indicator of at least 4.05%.
Monthly inflation of the Argentina nation led by Mauricio Macri, with the market expecting an advance of the indicator of at least 4.05%.
Image by Gerd Altmann from Pixabay

Latin America seems to be aligned in terms of inflation. That with the exception of Argentina and Venezuela, which are immersed in their particular economic crises and have suffered a sharp rise in the last year in the variation of consumer prices.

Although this would show a slight deceleration compared to March, when it rose 4.7%, it would mean a new blow for the Argentine president just one month after the inscriptions of the presidential candidates with which he will seek re-election, and in the middle of the advance in the surveys of its main rival, Cristina Fernández.

And is that if market expectations are met, inflation in the Trans-Andean nation will reach a new record, with a cumulative of 56.8% in the 12 months to date. This after more than doubling its price variation in one year, from 25.4% in March 2018 to 54.7% in the same month of this year.

Food and beverages, rates for public services and clothing have been the main drivers of the figure. Therefore, in mid-April, the Casa Rosada decided to freeze some prices, which could be partially reflected in today's reading.

Regarding the behavior of the CPI in the region, Oxford Economics highlights that the data has been advancing in recent months, but believes that these excesses could be temporary.

Brazil and Mexico will see their inflation indicators fall, until approaching the goal in the coming months, which would allow the central banks of both nations to cut their interest rates towards the end of the year. Today the Aztec nation is expected to maintain stable rates, effective as of December 20, in line with the steps taken by the US Federal Reserve in recent months.

Regarding Brazil, Oxford Economics considers that inflation has probably reached its peak so it could be seen a fall below the official target in the coming months. But movements in the central bank will not be seen this year or next, because underlying inflation is still extremely low. The Selic rate is likely to remain unchanged at its current historical level.

The same thing happened on Friday in Chile, with the central bank leaving the base reference rate at 3%, taking into account that inflation is at the lower limit of the target range. According to Oxford Economics, the outlook for inflation in Chile remains the most benign among the main Latin American economies.

The orientation of monetary policy in the Andean region will remain accommodative, interest rates will remain unchanged in Colombia and Chile, and will increase slightly in Peru at the end of 2019.

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